- The Washington Times - Wednesday, March 8, 2006

A reader recently wrote me, concerned that home prices were falling and that they might be lower than they were at this time last year.

Don’t worry, they’re not.

When the Washington-metropolitan housing market began to cool off around August and September of last year, many were worried that home prices would experience a sudden drop.

Analogies had been drawn between our high-priced housing market and the overpriced stock market of the late 1990s. Would home values fall like all those stocks did? Fortunately, they didn’t.

However, it is possible to find some negative numbers when looking at the sales data, but let’s see if we can make them less scary.

First, a word of caution. Monthly data is very susceptible to fluctuations caused by the sale of a few very expensive or very inexpensive homes. Those fluctuations even out in annual data, making 12-month data preferable for serious analysis.

But I want to see what happened over a seven-month period, so here we go.

At far left, today’s chart shows median prices for June 2005 compared to January 2006. June’s data represents the market before the cool-down, and as you can see, the median price of homes sold in June was generally higher than the median for homes sold in January.

The first important observation I want to make is: these aren’t the same houses. It is very rare that someone buys a home in June and sells it in January.

Even if someone did that recently, this data doesn’t necessarily mean that their home would sell for less money in January. Once a home’s value has been established by the marketplace, it’s likely to stay there.

Second, remember that January is a much slower month than June. We’re comparing a month that had nearly 13,000 sales with one that saw only 7,600.

June is obviously a better month to sell a home.

Third, even if homes did experience a minor dip in value, it’s all relative.

Look at the chart at direct left. This one compares January 2005 with January 2006. See all those positive, double-digit numbers?

Throughout the region, home prices were much higher this January than they were last year. Sure, almost all of that appreciation happened in the spring of 2005, but you can’t deny that home prices were up in January 2006.

So, did your home drop in value? I’m not going to say for sure whether it did or didn’t. Monthly sales data for entire counties isn’t going to help us determine that.

What I will say is: Don’t worry about it. The vast majority of area homeowners can rest assured that their homes are worth more today than when they bought them.

Contact Chris Sicks by e-mail ([email protected]gmail.com).

The statistics in this story reflect a metropolitan area that includes the Maryland counties of Montgomery, Prince George’s, Anne Arundel, Howard, Charles and Frederick; the Virginia counties of Arlington, Fairfax, Loudoun, Prince William, Spotsylvania and Stafford; the city of Alexandria; and the District.

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